Japan’s exports rose more than expected in October, driven by strong demand from China and other parts of Asia, despite growing uncertainties in global markets.

Exports increased by 3.1% year-on-year, led by significant growth in shipments of chip-making equipment, particularly to China, according to the Finance Ministry’s report on Wednesday. This marked a rebound following the first drop in 10 months in September. October’s figures exceeded economists’ forecasts of a 1% rise and were also bolstered by increased shipments of medical products to the United States.

Meanwhile, imports edged up by 0.4%, defying expectations of a 1.9% decline. As a result, the trade deficit widened to 461.2 billion yen ($2.98 billion), compared to 294.1 billion yen in the previous month.

This stronger-than-expected export performance has raised optimism about Japan’s economic recovery. Although the country’s gross domestic product (GDP) expanded for the second consecutive quarter through September, the pace of growth has been tempered by the drag from net exports.

“Today’s data raises hopes that external demand will revive in the October-December quarter,” said Hiroshi Miyazaki, Senior Research Fellow at the Itochu Research Institute. “The Chinese government’s stimulus measures have stabilized its economy and reversed the prior decline.”

Exports to China rose by 1.5% last month, rebounding from a 7.3% drop in September, with semiconductor manufacturing equipment exports surging by nearly a third. These gains align with signs that China’s stimulus policies are beginning to yield results, driving growth in certain sectors and boosting consumer spending.

Notably, Japanese exports grew despite the yen’s strengthening against the dollar, averaging 145.87 yen per dollar in October—2% stronger than the previous year, according to ministry data.

The export rebound occurs against a backdrop of heightened concerns about global trade policies. Business leaders are bracing for the potential return of Donald Trump to the White House, with fears that his proposed tariffs—60% on imports from China and 20% on other nations—could disrupt international commerce.

Some regions are already experiencing a slowdown. Shipments to the United States and Europe declined by 6.2% and 11.3%, respectively, in October.

The Bank of Japan (BoJ) is closely monitoring these developments. BoJ Governor Kazuo Ueda noted on Monday that while the Federal Reserve’s prospects for a soft landing have improved, risks tied to the U.S. economy and their impact on global markets require careful consideration.

The most pressing concern for Japan’s trade outlook is the impact of potential U.S. tariffs. Historical data from the U.S.-China trade war (2018-2019) suggests that a 1% increase in export prices, including tariffs, led to a 0.35 percentage-point reduction in profit margins for Chinese exporters, according to research from Stanford University’s Centre for Chinese Economics and Institutions. A similar scenario could hurt Japanese firms’ profitability, counteracting gains from the yen’s depreciation.

“We are not yet at a stage where Trump’s tariff policy is clearly impacting export volumes or exporters’ behavior,” Miyazaki told The Japan Times. “However, there remains significant uncertainty, and we must continue to monitor the policy stance of the next Trump administration,” he added.

As Asia prepares for potential instability ahead of Donald Trump’s potential return to the White House, Australia, Japan, and the United States are taking significant steps to strengthen their strategic partnerships.

Before Trump’s anticipated inauguration in January, U.S. Defense Secretary Lloyd Austin is working to reinforce Washington’s network of like-minded allies cultivated during President Joe Biden’s administration to counter China’s growing influence in the Indo-Pacific region. Under Biden, the United States has deepened defense ties with regional players such as Japan, South Korea, and the Philippines to address China’s expansionist strategies.

Austin’s first stop on this mission was Australia, where he joined his Australian and Japanese counterparts to announce that Japanese soldiers would now participate in an annual rotation alongside U.S. Marines in Darwin.

“Recognizing the critical role of the trilateral partnership in maintaining regional stability, we are committed to trilateral policy coordination and consultation on regional security challenges and contingencies,” the three nations’ defense ministers stated in a joint announcement on Sunday, emphasizing concerns over China’s growing regional presence.

In their statement, the ministers highlighted their “grave concern” over “destabilizing actions” in the East and South China Seas, specifically referencing “dangerous behavior” by the Chinese military toward Philippine vessels and other maritime actors. They also underscored the importance of maintaining “peace and stability” in the Taiwan Strait as a key regional priority.

It has been a while that the regional countries have expressed their deep concern over the rise of terrorism activities in Afghanistan and had repeatedly asked the Taliban rulers to stop turning the country into a hub for extremist groups.

The Taliban had always assured the neighbors and the world community that there are no terrorist groups in Afghanistan and the Taliban will not let any groups use Afghan soil against any countries in the region. Indeed, terrorism emanating from Afghanistan will be a driver of insecurity in the region and further afield and the threat coming from Islamic State (IS) and al-Qaeda terrorist network still exists.

In August, the UN Security Council committee had reported that extremist groups with thousands of fighters endanger the security of Afghanistan’s neighbors and pose a growing threat globally.

The report identified IS-K, the Afghanistan branch of IS, as the most serious threat in the Central and South Asia region, adding that the group was “projecting terror beyond Afghanistan”.

Chinese envoy expressed concern over the presence of over 20 terrorist groups in Afghanistan

China’s special envoy for Afghanistan, Yue Xiaoyong, had expressed concern over the presence of over 20 terrorist groups in Afghanistan. He said that these groups are posing security threats to China and the countries around the region. “Many countries share concerns about the security risks posed by terrorism in Afghanistan,” Mr. Yue said in an interview with the Beijing International Dialogue Center. However, Mr. Yue said that before the US intervention in Afghanistan in 2001, there were less terrorist groups compared to today.

“When the United States and NATO initially intervened, there were only one or two terrorist groups in the country. Now, after 20 years of occupation, there are more than 20,” he lamented. He also went on saying that China does not seek influence or control in Afghanistan, and emphasized over formation of a moderate and inclusive government. He also said that Afghanistan should “become for all parties to cooperate rather than becoming a geopolitical arena (competition)”.

He furthered that over the past three years, China has provided Afghanistan with 470 million yuan (approximately $64 million) in humanitarian aid and is negotiating an additional 1 million yuan in assistance with the Taliban.

Yue reassured China’s support for a stable and developed Afghanistan

Yue said that China is supporting Afghanistan in its path toward peace and stability, but said that this achievement could not be achieved sans an inclusive and moderate government.

“China supports achieving lasting peace, sustainable stability, and reconstruction in Afghanistan,” Yue said, adding that this includes “building a national political framework, forming a moderate and inclusive government, continuing humanitarian and developmental aid, enhancing security—especially cybersecurity—and working together for shared development.”

He also made it clear that China has no intention to interfere into internal affairs of Afghanistan, but said that there is need to address Afghanistan’s most pressing challenges, including humanitarian crisis, food shortages, refugee displacement, and terrorism.

Yue has traveled to Pakistan on Monday to discuss regional issues and bilateral ties concerning Afghanistan.  Pakistan’s Ministry of Foreign Affairs in a statment said that during his visit, Mr. Yue held “comprehensive discussions” with Amina Baloch, Pakistan’s deputy foreign minister, and Ahmad Naseem Waraich, the deputy foreign minister for Afghanistan and West Asia.